"Sorry, Mitt [and Newt], the President Doesn't Get to Set Gas Prices.

[Undertoad]

Originally Posted by tw

Some organizations sell future contracts. They must have the fuel. When instability or fear exists, then these organizations consume and store fuel for crisis conditions.

They could store and pay their contracts in oil, but it's more likely they just pay the contracts in cash, depending on how the security operates.

[tw]

Originally Posted by Undertoad

They could store and pay their contracts in oil, but it's more likely they just pay the contracts in cash,

If the Straits of Hormuz are threatened, future contracts say that oil must still be provided. So all over the world, oil tanks are topped off just in case. This causes price spikes that cause conspiracy buffs to invent evil. Welcome to a market where the actual price changes are not absorbed by the middlemen. Where price changes are near zero. Welcome to how all commodity prices really change.

Watch prices for electricity on the grid. Current prices are extremely stable. Currently at $19.6 per megawatt hour to $23.8 at the same minute. Prices can vary from $15 to $70 throughout the day. In the summer, those prices have risen to over $200. At one point, $400 per megawatt hour even when the grid was not overloaded. Why? In markets where price variations are actually seen by the consumer, these oil price variations are near zero.

But again, gas at $2.50 per gallon, $3.65 per gallon, and $6 per gallon is cheap. After all, what saw the largest increase in sales during the previous gas price jump? Largest SUVs. The lowest performance vehicles with the worst gas mileage were top sellers during that last price jump some years ago. Because gasoline prices are really so low. And price changes are trivial.

One can deal logically with the facts. Or let spin doctors and the local gossip News get then all childlike and emotional. When gasoline prices changed in the 1970s, those prices doubled. Did the $3 per gallon gas suddenly become $6? Only then were price variations worthy of historical note. Even electricity on the grid varies from $17 to $40 most every day.

Meanwhile, unstable news in the Persian Gulf (for political spin we now call it something different) means substantial oil is being stored all over the world. Causing a normal and tiny price spike.

Only the most excitable and emotional would entertain such local gossip news stories. Oil price changes are so tiny as to not even be relevant. But if you are a politician who gets elected by inciting the least educated and most childlike voters, then hype evil oil prices. Those are the people whose votes are manipulated by bogeymen. Gasoline at $6 per gallon is still cheap.

Addendum: ten minutes later, prices on the grid jumped to between $40.3 and $45.4. Where are the politicians hyping fears about our obsolete grid causing price spikes? It does not create fear and votes. Hyping near zero gas price changes does create a bogeyman.